Indonesia's hot terrain set to power its future

By Tom Allard, Jakarta

May 1, 2010 — 3.00am

INDONESIA has launched an ambitious program to tap the country's famed seismic volatility and become the world's leading producer of geothermal energy, one of the cleanest renewable sources of power available.

It hopes to accelerate its economic development, which is hampered by chronic electricity shortfalls and blackouts.

It has also pledged to reduce its greenhouse gas emissions in the next decade by at least 26 per cent below ''business-as-usual'' levels, making the energy objective even more demanding.

In a speech to the World Geothermal Conference in Bali this week, President Susilo Bambang Yudhoyono said Indonesia aimed to be the world's leading geothermal nation by 2025.

''Nations are striving to liberate themselves from overdependence on fossil fuels,'' he said, ''and to many countries, including Indonesia, a large part of the solution to that problem is the successful tapping of vast resources of geothermal energy.''

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Geothermal energy works by pumping super-heated water from beneath the earth's surface and turning it into steam to drive turbines.

Indonesia has 40 per cent of the world's potential geothermal resources and 265 potential sites for plants, thanks to its string of volcanoes.

The underground heat is relatively easy to exploit in Indonesia because it is close to the earth's surface.

Indonesia's geothermal reserves are believed to amount to 28,000 megawatts, or the equivalent of 12 billion barrels of oil. But the nation taps only 1200 megawatts of geothermal power at the moment.

Under Dr Yudhoyono's plan, 44 plants will be built by 2014, more than tripling geothermal capacity to 4000 megawatts. By 2025, Indonesia wants more than 9000 megawatts of geothermal power on stream.

''It's a big challenge,'' said Asclepias Indriyanto, executive director of the Indonesian Institute for Energy Economics. ''It will require collaboration between different arms of Indonesian government and new regulations.''

Getting Indonesia's notoriously inefficient and insular bureaucrats across different levels of government to co-operate is always difficult, but Indonesia's main barrier to achieving its geothermal goals is likely to be cost. The first phase of expansion to 2014 will require an estimated $A12.9 billion in financing.

The government wants it to come almost entirely from private sources, primarily foreign investors. But exploration costs are high and the construction of geothermal plants are roughly twice that of coal-fired power stations, though the ongoing operation and maintenance of geothermal plants is cheaper.

Almost half of Indonesia's potential geothermal sites are in conservation forests, though one plant has already been built in a protected zone.

The state-run electricity monopoly fixes the price at which power is purchased, and many are calling for it to be lifted for geothermal power.

One possible solution for Indonesia is to pare back its immense subsidies for petrol and redirect part of the savings into geothermal energy.

The cheap petrol scheme costs the government about $A16 billion a year and studies, including one recently by the World Bank, show that it favours the rich far more than the poor who it is supposed to target.